Traffic lights agree on 2024 budget

Federal Government - Traffic lights agree on 2024 budget

After days of negotiations, the leaders of the traffic light coalition have reached an agreement on the federal budget for 2024. According to Chancellor Olaf Scholz (SPD), the SPD, Greens and FDP want to stick to their central goals, but see themselves forced to make cuts and savings following the Federal Constitutional Court's budget ruling. "We don't like making them, of course, but they are necessary so that we can get by with the money we have available," said Scholz in Berlin on Wednesday.

According to him, climate-damaging subsidies will be abolished, spending by individual departments reduced and federal subsidies cut. The traffic light government is also examining an exception to the debt brake for further payments for the people affected by the flood disaster in the Ahr valley in 2021. It will approach the CDU/CSU as the largest opposition parliamentary group and ask for their support for this step.

The Chancellor reaffirmed the three central goals of the traffic light coalition: "We are forging ahead with the climate-neutral transformation of our country. We are strengthening social cohesion. And we are standing closely by Ukraine in its defense campaign against Russia." These three goals continue to guide the German government. "However, it is clear that we will have to make do with significantly less money in order to achieve these goals."

Coalition wants to raise CO2 prices for refueling and heating

The agreement, which Scholz, Federal Finance Minister Christian Lindner (FDP) and Economics Minister Robert Habeck (Greens) struggled to reach for days, provides a solution to the budget crisis almost four weeks after the ruling by the Federal Constitutional Court. Since then, the leaders of the coalition government have been discussing how to plug a 17 billion euro hole in the budget for the coming year. They also discussed the financing of numerous investments in climate protection and the modernization of the economy.

Following the ruling from Karlsruhe, 60 billion euros are missing from the so-called Climate and Transformation Fund, which had already been firmly planned for the coming years - around 13 billion euros in 2024 alone. The judges in Karlsruhe had declared a reallocation in the 2021 budget null and void and ruled that the Federal Government may not set aside emergency loans for later years.

Among other things, Ampel now wants to raise the CO2 price for refueling and heating with fossil fuels. Habeck and Lindner said in joint statements with Scholz in the Chancellery on Wednesday that they would return to the old price path of the grand coalition. A planned billion-euro subsidy for electricity grid fees is to be scrapped, as the German Press Agency learned from coalition circles. According to Lindner, the reduction in climate-damaging subsidies is to amount to three billion euros.

The traffic light coalition also wants to cut climate protection and transformation projects worth 45 billion euros by 2027. The Climate and Transformation Fund remains the central instrument of the federal government for the climate-neutral transformation of the country, said Scholz. It still has a total volume of 160 billion euros. However, expenditure would be reduced by 12 billion euros in 2024 alone.

Lindner emphasized that there would be "no reduction in social standards". Nevertheless, he said, savings of 1.5 billion euros could be achieved by making social benefits more targeted. The FDP chairman cited the labor market as one example. Refugees from Ukraine should be better placed. According to Habeck, the subsidy for the purchase of electric cars should also be phased out earlier than planned. The year 2025 was previously planned. There will also be cuts in the solar industry. "That hurts me," said Habeck with regard to both measures.

Ukraine assured of further aid

At the same time, the coalition leaders assured Ukraine of further and comprehensive aid. This support would be provided from the regular budget, "as we had planned and, above all, for as long as necessary", said Scholz. This included 8 billion euros for weapons, financial aid for the Ukrainian budget and probably more than 6 billion euros to support Ukrainian refugees here in Germany. "If the situation worsens as a result of Russia's war against Ukraine, for example because the situation on the front deteriorates, because other supporters reduce their aid to Ukraine or because the threat to Germany and Europe continues to increase, we will have to react to this," said Scholz.

The coalition government actually wanted to pass the 2024 budget before the end of the year, but it was already clear last week that this would not be possible due to consultation times in the Bundestag and Bundesrat. Now, at least the Bundestag Budget Committee could possibly complete its deliberations before Christmas. However, this depends on the exact scope of the changes to the budget. The Bundestag could then meet in January for the budget week and approve the figures, followed by the Bundesrat giving the green light.

Until then, a so-called provisional budget would apply. For the time being, only expenditure that is necessary to maintain the administration and fulfill legal obligations is possible. In practice, however, the Ministry of Finance can authorize the ministries to use a percentage of the funds in the draft budget that has not yet been approved each month.